>> representative thaddeus mccotter of michigan has announced his entry into the republican presidential contest. you can see his announcement today at 7:10 eastern here on c- span. >> welcome to c-span's "newsmakers." our guest today is senator rand paul, one of the founders of the senate tea party caucus. a reporter who covers congress for the "national journal" and another who covers congress for political. a couple of questions. >> do you believe the deadline established by tim geithner is a real deadline and if you're going to describe to your constituents in kentucky the damage that are going to be done

if the united states were mixed and fall into default, which tell the men do you believe there would be significant economic consequences as president obama said this week? >> ultimately, if a country keep spending more than it takes an, as to borrow more money. what i would say about the deadline is it the -- the deadline has already been moved three or four months and they could move again. the real thing people need to realize is that we bring in about $200 billion in revenue and spend about $20 billion on interest. there is plenty of tax revenue to pay the interest on our debt and never default. the responsible thing from the press -- for the president to do is to take off the table and say we will not default. we think it is the appropriate right thing to do. >> let me follow-up on that. the president said at a press conference today and there is a

bipartisan commission on this that there would be significant things the united states government could not do if the default situation were to occur. the bondholders could be paid, but obligations are guaranteed cannot be financed and we have to make tough choices about the things we could not do and at prioritizing with -- would inflict some damage. >> you are right. we might have to prioritize and be true legislators and decide what we have money for a we don't have money for. i'm reminded of yesterday on the floor when the senator from nebraska talked about when he was governor, there was a red line and he had money for that above the red line and no money for them below it. he had to make choices. if it was below the red line, he had to take away something from above the red line. that is what the american people expect. in washington, we have just added program after program. we do need to make tough -- we

do need to make tough choices. if we did not, it would be like passing and immediate past budget. there would be significant cuts, but you could still pay the interest, you could pay social security, you could pay the soldiers' salaries, but there would be things like the 82 programs that are due clip -- that reduplicate programs to train workers. you may have to get rid of 81 of them. >> i would like to ask you about the keeper of that deadline -- tim geithner is expected to leave pretty soon. he has let it been known to the white house that he will like to get going. who do you think would make a good treasury secretary and what should they be looking to do? >> i have never been that excited about the president has picked to help us with our financial problems. both ben bernanke and tim geithner did not predict the housing bubble and their policies were what created the

housing bubble and the ensuing collapse. and the enormous recession and joblessness, i put at the feet of ben bernanke and tim geithner. i think it was an enormous mistake. i think they failed us during the housing boom and crisis. to depict in particular, it would have to be someone who believes in the marketplace, that interest rates should not be manipulated and credit should not be manipulated by the government and we should allow the marketplace to help us make wise decisions about what the price of things should be. >> is there someone who would be your dream can't it? >> i think it is probably better to talk about the policies i think the person -- than the person. i don't think the republicans will get a say unless we get a republican president. >> to follow-up on the press --

on a question, do you think the treasury secretary nominee would be the kind of nominee that could be subject to a filibuster? there have been other nominees currently being blocked by senate republicans. is that something washington should gird itself for? >> it's hard to make a prediction on what people do not knowing who the nominee is. what i would argue for is we should try to get someone in as an appreciation of the marketplace and business. the biggest complaint i have had with this administration, and i talk to business people every day, they think this is the most anti-business administration we have had. business is beleaguered. many of the folks in this administration have never run businesses. we would like to see someone with business experience and someone who believes in the free marketplace, who believes in capitalism and who believes in the greatness of what america has produced in the past and could produce in the future.

but that is not meeting we need more shovel-ready jobs. we need more relief for the businesses that are creating the jobs and i don't think this administration understands that. >> getting back to the debt talks, the impasse currently is overtaxes. is there any tax increase at all put on the table by the administration, whether it deals with corporate jets or inventories or maybe even a change in the way the government calculates the consumer price index -- it may not be a pure tax increase but a change in policy. is any of that acceptable to you and would be acceptable to those inspired by the tea party caucus in the house or senate? >> what is funny is last week, 70 of us, including all the tea party caucus, voted to get rid of the ethanol credit. we are more than willing to look at tax code.

the tax code, for going to do overall tax reform, we want lower rates and a simplification of rates to go along with getting rid of special tax cuts that distort the tax credits and tax deductions and distort the market place. if we're just going to pick out a hundred tax deductions to get rid of, that's going to punish the marking -- punish the marketplace and make it more difficult for jobs. the vast majority of economists say it's not a good idea to have tax cuts in a recession. democrats think the rich should have more of a burden, but we already have a progressive tax code. so the rich pay more in tax codes. if they want the rich to have more of a burden to figure out this problem, one way we could do it, and i think this is the common ground, is means testing on benefits. i'm all for means testing on

social security and medicare. that will allow the rich to absorb more of a burden and pay more of the cost and it would please the democrats and be the compromise because most republicans do not want to raise taxes but we would accept the rich having more of the burden by reducing their benefits. >> the tax code is a very difficult topic to tackle in such a short time. we keep hearing delaying the decision making in giving a temporary measure right now. would you support a temporary fix? >> i was part of a group this week that said no more. we are tired of talking about extraneous issues and we have had not one minute of debate about the debt ceiling in any committee. we have not had a budget in two years, we have not had an appropriations bills in two years. i'm part of the freshmen group in the senate saying no more. we're not going to get to any

issue if we have a say in it. we will filibuster until we talk about the debt ceiling and proposals. many of us in the conservative wing will present our own proposals next week to raise the debt ceiling. we will vote in favor of raising the debt ceiling next week, if we can, but it is contingent upon passing a balanced budget amendment to the constitution. the american people do not want us to just raise the debt ceiling and keep doing what we have been doing. only 14% of the american voters approve of what we have to ring and it has been a disaster for the country. they don't want us to raise the debt ceiling. but i am not completely without the sense we may need to raise the debt ceiling. but i will lead to if we have significant budgetary reform. that means you have to balance your budget every year. >> there has been mention of the tea party caucus and i want to know how tea party caucuses

are influencing the way lawmakers are making their decisions. maybe those who are starting to pay attention -- there is a lot of mistaken ideas and a lot of belief in perhaps uniformity of thought on things and i'm curious how you think they are affecting congress. >> the one uniform proposal comes out of the tea party, that we are in universal agreement on is that the number one concern for the country and for our people is the debt. we are worried about a looming debt crisis and we think the nation may not be able to withstand this amount of debt and we are not alone. you probably would not say the admiral from this administration is a tea party or has said the number one threat to the country is the debt. people are waking up to the dead being a problem and we may not

be able to sustain it. there was a it editorial in the "wall street journal" that said if interest rates go back to their historical average we would add five trillion dollars more to the debt in the next decade. it is unsustainable. we are headed for a crisis. people say it's the most predictable crisis we've ever had in our country. but we have to do something now and it's going to take something different than business as usual. business as usual. we will talk about a cut and a cut that will come in over 10 years. it will happen. nobody believes it. we cannot bind future congresses. the only way we will ever change the culture of washington and the future of the countries to bind future congresses by changing the constitution. >> would you say the main effect of the tea party is to have this debate and not simply raise the debt ceiling has has been done in the past? >> i think we are controlling

the debate. i think those of us concerned about the debt, we have the public with us. we are monopolizing the public debate, we are still losing most of the legislative battles. but you don't always win in the beginning but i think we are shaping the debate and by all means i think we are having an influence on what will come out of this. >> if i recall correctly, and i invite you to correct me if i'm wrong, 18% spending as percentage of gdp and supermajorities to raise taxes above that, to have that correct? >> yes. >> i grew up in california. california has a similar bias against tax increases and legislators have to reach a certain supermajority to increase spending. yet california has been bedeviled by budget crises for the past decade. heating components like this do

not guarantee your not going to have budget crises. -- even components like this did not guarantee your not going to have a budget crises. at the state level, it has proven if you have a bad economy or spend too much, you still love budget issues. >> i think that is a good point and i think there is no guarantee that anyone law will make as badges -- will make us better legislators. but it works in many states. where we have this debate, what you brought up will be an important point and you have to examine california and why they're balanced budget amendment does not work. in many states it does work. it works in nebraska, it works to a certain extent and kentucky. in kentucky, we are still allowed to borrow and that is a problem. in california, they can balance the budget but they are allowed to do it with borrowed money. california and illinois are in danger of bankruptcy. they are good examples, but

there are good examples -- 49 states have some kind of provision about balancing the budget. some are better than others. we want a strong provision because the system is not working. anyone who examines the washington is working would say it's absolutely broken and it is not working at the deficit gets larger and larger. we cannot sustain a $1.5 trillion deficit every year. >> would you it knowledge you are not even close to having the votes to passing this incentive? >> i would never acknowledge that. i don't know what's true and what is not true. i would say i'm an optimist. i see that opportunity and difficulty as winston churchill said, and not the difficulty in opportunity. we have 47 votes, all 47 republicans have signed on in the senate. in the house, i think we're very

close to getting the two-thirds. what i have been telling folks as i would like to see the house vote first and to get that two- thirds. it takes 40 or 50 democrats. realize that this is an incredibly popular issue. it has lost by one vote in the senate before and one vote in the house over the last 25 years. if you poll this question, 75% of democrats in the public of voters are for this. republicans also. independence also. it polls across all party lines. to democrats who want to vote against the balanced budget, i say at your own peril. come to us and work with us and let's get past for the good of the country. this is beyond party politics. i will say on national tv that republicans have been part of the problem. it's not just the democrats. we need restraint and if we don't get it, the country's going to hell in a handbasket. >> the ones being looked at in

the mid-1990s are very different than the one you're looking at right now, particularly the treatment of taxes and the ability of future congresses to raise them if they want. why not work with the democrats to find something that would appeal to them in terms of coming on board. use the need to get 50 in the house, why not work with them on that? >> you have to start somewhere and they have not introduced a thing and we're going to introduce something. the only way to know what happens is you introduce what you want and if you get some people who say we're 10 voip -- where 10 votes short, would you do this to the bill, i think you have to talk to the people to get 10 votes. but we have to get started and see if any of them are willing to discuss it. if the democrat party is going to uniformly opposed to budget balance -- a balanced budget a mammoth, we will not get to a compromise.

but if 40 or 50 in the house want to get together and say we will do it if we get this, then there will have to be discussions. i worry about giving up the supermajority to raise taxes because i do not want this to be a prescription to raise taxes. that would be devastating to have a significant tax rates. >> i'd like to ask about your dad. iowam andy -- if i am an caucus goer, why would i vote for ron paul instead of michele bachmann? >> the interesting thing about my dad as he has been right about every economic issue over the last 20 years. in 2003 in the banking committee, he said it was coming. he said explicitly that the housing bubble is going to get bigger and we're going to crash and it is because we are subsidizing fannie mae and freddie mac and telling people to buy houses with no down payment. he said it is coming. he has been a little different

and some republicans in that he believes are foreign policy should be constitutional. you should not go to war simply on the word of the president. you should have congressional debate and congressional authorization for war. that is what the constitution has said. many in the republican party, including michele bachmann, are coming his direction on this. the debate on libya shows the influence of ron paul and the republican party. you have majorities or near majorities to say the president is wrong for going to war without congressional authority. >> speaking of libya, that is going to be on the senate floor next week. you said you would try to filibuster whatever is going to be on the floor to bring up the debt. does that mean you would filibuster and move to bring the libya legislation to the floor? >> i have been one of the most vocal in the senate about bringing libya to the floor. i wanted to bring it to the floor when it was still within

the realm of a law. now the president has evaded the law and says it's not really a war and has shown utter disdain for congress, butter disdain for the constitution. he has the gall to tell the american public that it's not a war because they're not shooting back. i think people see that and are concerned with the person that will so manipulate the facts to say fighting and bombing is not war. we have already missed all the deadlines. what i am saying is we were not supposed to be in session at all next week. libya would have to occur the following week. we insisted on coming back to talk about that and we want to put up a proposal. we will introduce a proposal to raise the debt ceiling contingent on a budget -- on a balanced budget next week. i think libya can wait another week because the president is ignoring all the deadlines and rules anyway. >> what was your reaction to the

president's press conference and saying his daughters are more disciplined about their homework and congress is about their business? >> i sensed a certain air of arrogance that i don't think the american public is going to be too happy with. the next day, we wanted to debate him and what the democrats do? they adjourned. the president was campaigning and fund raising in philadelphia. where was the vice president? campaigning in las vegas. it is galling that he gets in front of the american public and says congress is not doing their job and here we are standing there trying to get an agreement and we can get a vote to the floor because the democrats prevented. then he is jetting off on a private jet -- on a taxpayer funded jet, to go campaign. >> i want to ask you about some home state politics. you were not supported by the senate minority leader.

are you going to support him for reelection when he comes up in 2014? >> i can't a imagine not. senator mcconnell and i get along quite well and he has been a great leader and this balanced budget amendment fight. he has gotten all 47 senators together doing this. i cannot imagine anything but supporting him at this point. >> continuing the conversation about the balanced budget, what would you say to those who revere the constitution -- i'm not saying you don't, but say it is polluting it to the constitution to put something so specific like 18% of gdp in the constitution itself which has always been not only a simple but very clear document? it has a broad parameter and not granular details about budgetary issues. >> that expect to the whole california thing. the california balanced budget is not working, so maybe it has to have more detail.

those are things that can come out in the debate and are open for discussion. the fear is we do not want a budget that balances at 25% of gdp. right now, we spend one in $4 in washington where two or three years ago it was one in $5. we have ratcheted up the percentage of the economy being consumed by government expenditures and we want a smaller government. the other thing that is interesting is no matter what the tax rates are, 18% is about what comes in. in the '50s, a high tax rates were 70% and 90% for the very high income and brought in about 18% of gdp. we got rates to 28% and brought in about 18% of gdp. it is hard to coax more than that out of the economy. wealthy folks a lot of times leave or take their capital overseas if the taxes are lower

in another country. so 18% is historically over 60 years, we've never got much more than 18%. if you want to balance your budget coming have to get expenditures down to where revenues are. >> do you expect the debt limit to be resolved in one fell swoop or will there be enough to negotiate more and a couple of votes on it? >> i don't know. the only way they can get my vote and several of our votes, at least 12 of us have said there has to be significant cuts, statutory caps and a balanced budget amendment to the constitution. we think washington is so broke and the american people don't want more of the same. don't trust the folks who have been running the show and want something different. i was elected on a wave that came and the people in kentucky would not understand it at all and would write week -- would

rightfully vote against me if i said let's raise the debt ceiling without significantly reform in the process. >> does that mean you don't trust the people who have been up here like mitch mcconnell and harry reid? they have been around for decades. do you trust these guys? >> i don't like to make it about any individuals. on our side, mitch mcconnell has led the fight to get all 47 on board for a balanced budget amendment. i do not place the blame there. but i don't trust the system of the way we have been appropriating money. i do not trust the lack of restraint. for about 150 years, our constitution did restrain the size and growth of government and we believe in what were called the enumerated powers. there were only specific things that could be done in washington. then we got this expansive notion of the commerce clause. that is how they're trying to

justify a obama care. that's the notion that government can do anything. i jokingly say in my speeches this my shoes are made in tennessee, they can regulate my walking in kentucky. the commerce clause meant they want free trade between tennessee and kentucky. they don't want kentucky to set up barriers to trade with tennessee. that's what it is about, not getting involved with all the manufacturing in the states and having a huge government presents from washington in all the states. >> we are out of time. maybe your question about the optimism that a deal will come together. >> thank you for having me. >> let me turn to our reporters. we know the senate is in session this weekend have heard the president and vice president for coming up to me with democrats. how you see this coming together? >> i don't.

i wrote that this week monday. i don't see the impetus. i see the threat of a big problem. but i do not see the parties moving beyond their entrenched positions. in fact, i would characterize this week as a week of entrenchment and deepening the difference. if you want to use a military metaphor, digging trenches deeper. the president's press conference was about establishing the democratic point of view and pushing it out. there was a bit of jawboning with republicans that did not go over well. you cannot create an atmosphere for creating a deal by suggesting your opposition party leaders in congress are less disciplined than 10 and 13-year- old. things are in a much tougher position and i do not see the end game. >> i would agree on the point that you throw like a girl is

not the way to get people to come to your side. nor is it a 21st century thing to say. i think these guys are stumbling and bumbling. it reminds me of "thelma and louise." these guys are screaming at each other and don't even know the cliff is there and to the extent they do, they have forgotten about it. if there was to be a solution, it may be that they kick the can down the road. republicans have leverage because barack obama is more responsible for the health of the country than the speaker of the house. it is possible there be some sort of short term solution which involves mostly spending cuts, but ultimately, you saw the president preparing his base for the eventual concession. frankly he was robbed -- he once wrote -- he wants what republicans have, which is a vote on the debt ceiling and that means they get to set the

price. >> you have both heard the rumors that the treasury secretary is ready to depart after a decision is made. it seems he has moved to squash that and say he is here for the foreseeable future. i'm wondering about the lame- duck aspect about the treasury secretary since the word is out he is seriously considering leaving and how that factors into any deal making. >> i do not know this to be true, but my experience in washington tells me that the way of telling republicans this is the sweetener. if you don't like him, he's going. if that helps you get to a place where you can help us out, knowing full well that not only is he going to leave, but your senate republicans will be in a powerful position for the confirmation process to have some influence about the next treasury secretary, that's how i interpreted that. >> if he is not leaving, somebody's done a very good job undermining him. it turns him into a lame duck

immediately. he is right about the sweetener out there but it is president obama that these guys alike and they are not getting rid of him before 2013 at the soonest and probably later than that. i'm not sure that's going to bring anybody on board. >> it is reported as senator mitch mcconnell and the president have a non existing relationship. different generations, they see the world differently. how might that factor in to any potential outcome? >> i would say the relationship is strained and it's not so great with the speaker of the house either. it's ok, but it's not great. they have a sense -- the speaker was a press conference and someone asked about if you heard from the white house on this matter and he said that would require the white house to pick up the phone. someone said they don't do that and he said they do not. and he said they do not.